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Hi Peter,
Didn't get to see you when I was in KL a few weeks ago. I heard you were
in Melbourne. The press in KL on the so-called "Soros Attack on the
Ringitt" was really over the top - Dr M was jaw boning a lot. Really it
was nothing personal at the time the US/DM was on a 6 or 7 year high as was
the US/SF. The Malaysian Government is better off letting the exchange
rate move according to demand and supply. Then it can manage its Money
Supply and interest rates without having to raise or lower rates to
maintain an artificial level. In the long run it is squashing inflation
and lowering interest rates that helps the Stock Market and floating the
Exchange Rate helps get control over inflation eg US experience. Regarding
the effect on the Stock Market, the short term is a bit rocky for KLCI but
the long term future is excellent.
While the quality of life ie environment/air etc is no where near as good
as Australia it is a far better place to have good ideas and to carry them
out. The struggle to shrink the effect of what Westerners would term
"corruption" (and Asians would see as "Business") in Asian economies is
probably the real cause of a re-rating of the the Stock Market rather than
the Ringitt move. The KLCI topped in March and the Ringitt was not really
under pressure then.
All in all, the Asian governments are at least willing to help new ideas
and businesses not ride on the back of them while tieing up their feet with
red-tape - I Hope Little Johnnie Howard is listening - or hobbling them
with taxes. This bodes well for the future of all Asian Markets. This is
the clean out they had to have.
PS The KLCI looks a lot like the SPI did in 1995/6. Have a look at them.
The long term trends of both - while not the most exciting charts are still
up.
Regards
david Hunt
----------
> From: Peter Lim <peterl@xxxxxxxxx>
> To: realtraders@xxxxxxxxxxxxxx
> Subject: GEN: ASIAN Currencies $ Stocks in Turmoil
> Date: Monday, 11 August 1997 13:14
>
> Hi RealTraders',
>
> If you have been following developments in ASIA, currencies of these
> developing countries including Thailand, Phillipines, Indonesia, Malaysia
> and even Singapore have all been dropping owing to the actions of hedge
> funds and foreign currency traders selling "short" these currencies. The
> Central Banks of Thailand and Malaysia have attempted to stop the
> speculation of these currencies by limiting the forward contracts of
> purchasing the local currencies by a set amount, so that speculators are
> unable to cover their shorts and thus are "punished" to cover their
shorts
> in other ways, notably one of which is to sell their physical stock and
> shares in the equities market to get local "dollars". This has caused
> turmoil in the stock markets. For example, the PE Ratio of the Kuala
Lumpur
> Stock Exchange is now at a 17 year historical low of around 12.
>
> Just yesterday, the authorities have declared that the Central Bank of
> Malaysia will no longer defend the local dollar, the ringgit, and
therefore
> it is expected that the Central Bank will no longer come in to prop up
the
> dollar in value terms.
>
> I am no currency trader, and would like to hear from experienced forex
> traders and stock traders just how this will impact on the stock market
> here in Malaysia. Would the awowed "hands-off" policy from the Central
Bank
> ( the local equivalent of the Fed) give a positive impact to the
> stockmarket or otherwise?
>
> Thanks.
>
> Peter
>
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